NEW YORK - The euro fell for a third day against the dollar on Friday and commodity-linked currencies such as the Australian and Canadian dollars also weakened, weighed down by a generally risk-averse environment following soft trade data from China.
The Chinese trade numbers, coupled with a series of weak euro zone and U.S. data reports, raised worries about a global slowdown.
“We are seeing signs of global risk rising and the details out of China are just weighing on risk appetite,” said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
The euro slid 0.3 percent to $1.2267, off a one-month high of $1.2443 struck on Monday, and on track for its first weekly loss in three weeks. Traders cited bids at $1.2250/60 with offers above $1.2300.
Expectations the ECB will step in to ease borrowing costs for Spain and Italy helped the euro to a one-month high against the dollar and saw it rally against the yen earlier this week.
But those gains have faded as investors booked profits.
“What we’re seeing in the euro is just a retracement of that big huge move we got last Friday and we have seen a 50-60 percent retracement of that,” Sutton said.
“And it is a combination of several factors — we haven’t had any positive news out of the euro zone and in fact, we’ve had generally weak data from that region.”
Germany’s economy ministry comments that the country faced “significant risks” linked to the euro zone crisis also weighed on the region’s common currency.
Next week, euro zone second-quarter economic output data is expected to show a contraction and is likely to put pressure on the ECB to cut interest rates, a factor that could weigh on the euro.
“The leading indicators out of the euro zone are weak, even in core economies so our fundamental bearish view on the euro remains in place,” said Chris Walker, currency strategist at UBS. “We are targeting $1.20 in the next one to three months.”
Despite the euro’s fall, implied volatilities are subdued. The one-month euro/dollar implied volatility traded around 9 percent, against 10 percent a week ago. Option traders said that unless the euro broke below $1.2250, volatility would drift lower.
Chinese numbers
Earlier, below-forecast Chinese data cooled appetite for riskier currencies. Exports grew just 1.0 percent in July year-on-year, below expectations for an 8.6 percent increase. Imports grew 4.7 percent, compared with a forecast for a 7.2 percent rise.
The Australian dollar fell 0.5 percent to US$1.0520, a day after touching $1.0615, its highest since March 20.
Before the Chinese data, the Aussie had fallen after the central bank released its quarterly monetary policy statement, in which it upgraded its 2012 economic outlook but warned a strong currency could constrain growth more than in the past.
With demand for risky assets ebbing, investors chose the safety of the dollar and the yen.
The dollar bought 78.26 yen, down 0.4 percent on the day but still in the narrow 77.90-78.80 yen range that has held since late July. It hit a three-week peak of 78.79 yen on Thursday, with traders citing exporter orders above 79 yen.
Earlier Japan’s controversial sales tax bill was passed by the upper house of parliament, a step analysts said could eventually exert pressure on the Bank of Japan to ease monetary policy further in coming months.
Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, said the dollar could also gain against the yen due to a rise in U.S. Treasury yields on solid U.S. data. This could temper expectations of more Federal Reserve bond buying.
The dollar index was up 0.1 percent at 82.745, well above a one-month low of 82.041 touched on Tuesday.
